THE £145.50 licence fee should be scrapped and replaced with a Sky TV-style subscription service, a secret report by leading industry executives has recommended.

"The report recommends that the BBC pursue a inflationary licence fee increase with greater commercial revenue. No subscription model is recommended

BBC spokesman

The overhaul of BBC funding is the brainchild of a review panel set up last year by James Purnell, a former Labour cabinet minister and now BBC strategy director.

It highlights how seriously the issue of how to finance the corporation is being taken, in a week where it was announced BBC3 would be scrapped as part of a £50million a year cost-saving measure.

Other members of the review panel include David Elstein, the former Sky, ITV and Channel 5 executive; and Alice Enders, a communications consultant.

A number of backbench MPs are supporting the idea.

But the BBC today dismissed the proposals, and instead said it was moving forward with recommendations to increase the licence fee in line with inflation and step up the amount of money it makes through commercial ventures.

A BBC spokesman said: "The report recommends that the BBC pursue a inflationary licence fee increase with greater commercial revenue. No subscription model is recommended."

The future funding of the BBC is in the spotlight, with its charter up for renewal in 2017.

Former Labour minister James Purnell [GETTY]

On Friday, Justice Secretary Chris Grayling announced the Government was considering changing the law so TV licence dodgers could escape criminal charges.

Those who avoid paying the £145.50 fee currently face a £1,000 fine and a criminal record, as well as the prospect of jail if fines are not paid.

But under proposals being examined by Mr Grayling and Culture Secretary Maria Miller, offenders would only face civil proceedings - akin to getting a parking ticket.

The BBC fears removing the threat of a criminal record for dodgers will see more people avoiding payment.

BBC Director General Lord Hall last week confirmed that digital TV channel BBC3 is set to be axed as part of the latest bout of cost-cutting at the corporation.

The channel will move online to save £50 million a year, and Lord Hall refused to rule out further cuts, including axing BBC Four.

The corporation is also aiming to make more money through a revamp of the iPlayer which will allow viewers to access paid-for programmes from a new BBC download service has been given the go-ahead.

The idea of replacing the subscription service has been raised before. Last month former Crimewatch presenter Nick Ross said that the current charter should be the last and it should be replaced with a subscription system.

Addressing a seminar discussion for the think tank Civitas, he said: "The licence fee has just reached the end of its natural lifespan. It's already 88 years old and she will be well into her 90s by the time of charter renewal."

At the time the BBC said a subscription model would lead to "more expensive fees paid for by fewer people".